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1. Seahawk Investments just paid an annual dividend of $2.00 a share. Management estimates the dividend will increase by 30 percent a year for the
1. Seahawk Investments just paid an annual dividend of $2.00 a share. Management estimates the dividend will increase by 30 percent a year for the next three years. After that, the annual dividend growth rate is estimated at 3 percent. The required rate of return is 12 percent. What is the value of this stock today?
The Dividend for D4 is 4.52, why is that value not included in the final step of the price model?
Present Value of the Share (P0) is calculated as (1+k)D1+(1+k)2D2+(1+k)3D3+(1+k)3(kg)D3(1+g) Present Value of the Share (P0) =2.60(1.12)+(1.12)23.38+(1.12)34.394+(1.12)3(0.120.03)4.394(1+0.03) =2.60(1.12)+(1.12)23.38+(1.12)34.394+(1.12)3(0.09)4.394(1.03)Step by Step Solution
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